The opinion of the court was delivered by: SHADUR
Five former employees of Amoco Corporation ("Amoco") have brought this class action against the Employee Retirement Plan of Amoco Corporation and Participating Companies ("Plan") and Amoco (in its capacity as Plan Administrator)
under Employee Retirement Income Security Act ("ERISA," which comprises 29 U.S.C. §§ 1001-1368) §§ 1132(a)(1)(B) and 1132(a)(3). On behalf of themselves and of all other Amoco ex-employees who have received pension benefits under the Plan, plaintiffs seek to force Amoco to recalculate their pensions to include pay in lieu of vacation within the "earnings" component of the calculation.
Both sides have now moved for summary judgment under Fed. R. Civ. P. ("Rule") 56. They have briefed the motions and have complied with this District Court's Rule ("GR") 12(M) and 12(N),
so that the cross-motions are ready for decision. For the reasons set forth in this memorandum opinion and order, plaintiffs' motion is granted and Amoco's motion is denied.
Summary Judgment Standard
Under familiar Rule 56 analysis, a party seeking summary judgment bears the burden of establishing the lack of a genuine issue of material fact ( Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). This Court is called upon to draw inferences in the light most favorable to the non-moving party, but it is "not required to draw every conceivable inference from the record--only those inferences that are reasonable" ( Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991) and cases cited there). Where as here cross-motions for summary judgment are involved, these principles require the Court to take a dual perspective--one that this Court has frequently described as Janus-like. In this instance that problem does not exist, for the underlying facts are not in dispute--instead the parties are at odds only about whether the term "earnings," when used for purposes of calculating pension benefits, includes pay in lieu of vacation. Thus this case turns on a question of contract interpretation, making it ripe for final disposition at the summary judgment stage ( Bechtold v. Physicians Health Plan of N. Ind., Inc., 19 F.3d 322, 325 (7th Cir. 1994)).
Under the Plan
there are three alternative formulas for calculating benefits: the Annuity Benefit Formula, the Career Average Minimum Formula and the Service Minimum Formula. When an employee becomes eligible for a pension, he or she is entitled to a benefit based on the highest of the three calculations.
At the center of the present dispute is the Annuity Benefit Formula, which is based on the average annual earnings of an employee-participant during the highest consecutive 3 calendar years out of the last 10 years of employment (Plan § 5.01).
Amoco calculates the pension benefit by multiplying an employee's average annual earnings by a constant fraction, then multiplying that figure by the employee's length of participation in the Plan (id.). While the fraction remains constant, the size of an employee's benefit is thus related in linear fashion to the employee's average earnings figure and length of Plan participation.
Under the Career Average Minimum Formula the benefit is calculated by multiplying a constant fraction by the employee's average annual earnings throughout the employee's career (Plan § 8.02). As with the Annuity Benefit Formula, the size of a participant's pension is directly affected by the average annual earnings amount.
Under the Service Minimum Formula the benefit is calculated by multiplying a constant dollar amount by the number of years of service (Plan § 8.03). Because that calculation is wholly unrelated to earnings, it is not relevant to this action.
Amoco's vacation policy can be described generally as "use it or lose it": Employees must take their vacation time each year or else forfeit it (D. 12(N) P33; Summary Plan Description ("SPD") Book 1 at 15-16). One critical exception, and the one that gives rise to this lawsuit, is that persons who retire or who otherwise leave the company may receive pay in lieu of earned but unused vacation--but solely for the year in which employment is terminated (all unused vacation time for earlier years having been forfeited (D. 12(N) P33)). Amoco claims that it gives each retiring employee the option of either taking pay in lieu of vacation or using the vacation time to extend his or her retirement date out beyond the date when he or she actually stops working (Brennan Aff. P13), but plaintiffs contend that they were not given that option (Complaint P49; Gallo Aff. PP3,9).
At any rate Amoco reserves the right to determine when vacations are taken (SPD Book 1 at 16) and "typically" controls an employee's date of termination (D. 12(N) P30).
When employees leaving the company take pay in lieu of vacation, it is Amoco's policy to exclude that pay from earnings for purposes of the Annuity Benefit Formula (D. 12(N) P24). However, Amoco does use pay in lieu of vacation to calculate earnings for the Career Average Minimum Formula (D. 12(N) P25). Finally, when a retiring employee instead uses vacation time to extend his or her retirement date beyond the date on which he or she last works, Amoco counts the vacation time in making the "length of participation in the plan" calculation (Gallo Aff. Ex. E).
Neither the Plan nor the SPD expressly addresses pay in lieu of vacation. 1985 Plan § 1.23 originally defined "earnings" this way:
"Earnings" means salary, wages, overtime, commissions, bonus payments and other compensation of a similar nature (all to the extent includable under the terms of the plan) received by an employee for his personal services as determined by the Company.
In January 1989 that definition was amended by the Plan's Eighth Amendment, so that revised Plan § 1.23 read:
"Earnings" with respect to any Employee-Participant means total salary, wages and commissions, including forms of base pay delivered in alternate manners such as piecework and payment by mileage for drivers; overtime; shift differentials; and bonuses in the year received, including bonuses in the form of premium pay for services rendered outside of normal working hours or conditions; provided payment is received by an Employee-Participant for personal services. For purposes of this subsection the determination of Earnings shall be made without regard to salary reductions contributions made on behalf of an Employee-Participant to a plan maintained under the Internal Revenue Code of 1986 "Code" Sections 125 and 402(a)(8).
Then 1993 Plan § 2.12 changed the term "earnings" to "compensation" and made other minor changes:
"Compensation " means total salary, wages and commissions, including forms of base pay delivered in alternate manners such as piecework and payment by mileage for drivers; overtime; shift differentials; and annual bonuses in the year awarded and received, including bonuses in the form of premium pay for services rendered outside of normal working hours or conditions; provided payment is received by the Participant for personal services. For purposes of this subsection the determination of Compensation shall include ...